Dip in remittance is an ominous sign
No matter how the matter is portrayed by various quarters, facts can hardly be ignored that inward remittance is falling. When that is coupled with falling exports of apparels (RMG), it is time for policymakers to sit up and take notice. According to a recent report published in this newspaper, "foreign-currency reserves dropped below US$31 billion due to a significant fall in inward remittance flow in April, according to central bank officials. This fall in forex reserves has led to uncertainty in meeting the net reserve-threshold of US$24.46 billion by June next, set by the International Monetary Fund (IMF)". Bangladesh Bank (BB) officials have pointed out two reasons responsible for the fall in reserve, one being the increased sale of dollars to banks to settle letter of credit (LC) payments and the growing trend of falling inward remittance through official channels.
LC payments will have to be made regardless of the foreign currency (FC) situation if the country wishes to continue to import essentials. Unfortunately, these imports cannot be avoided despite austerity measures. Though most of the media remain focused on increasing RMG exports since this sector constitutes 80-85 per cent of the export basket, the matter of remittance has remained lower on the priority list.
Money sent by expatriate Bangladeshis using illegal channels is equivalent to nearly half of the remittances comes through formal routes. Recent media reports have claimed that the hundi system allows for about $10 billion to reach local dependants of expatriate Bangladesh workers and all these greenbacks stay outside the banking and institutional channels. What a colossal loss for the economy! Policymakers had hoped that since more people went abroad to work this year, remittances would make up the shortfall. Unfortunately, official data state that there has been a drop in remittance by 16.76 per cent in April compared to the preceding month of March.
For some time now, bankers and economists had been clamouring for a change in the way inward remittances are treated officially. Procedures needed simplification; banking rules had to change in order to make it easy for the semi-literate blue-collar workers to be able to send money with as little hassle as possible to Bangladesh. Many good suggestions were made, of which one was absolutely mandatory and that is to reduce the gap in the exchange rate between what was on offer from official channels and unofficial channel, i.e.,'hundi'. With a spread of Tk5.0-6.0 per dollar, why would these poor, hardworking men (and women) go through the hassle of finding a bank or other financial service (approved by BB) that paid less Taka per unit of foreign currency?
It appears that the authorities have begun to take note of it finally and the exchange rate has been revised upward by Tk1.0 in the hope of helping exporters and remitters. To what extent it will help in the case of remittance remains a wild guess. Making statements about hundi being illegal is simply not going to make a dent in this trade. Talking about patriotism and how it is every citizen's duty to help the country's economy is also not going to help matters. What will help, of course, is what has been stated many times previously on different panels of discussion with policymakers. Take proactive measures to address the root causes of why people are more at ease using Hundi instead of the banking channel to send money home.
While the plan to increase the return on dollar to remitters is a good idea, Hundi is an ancient means of remitting money with minimal hassle and paperwork. As the system is entirely based on trust, frauds have defrauded many workers of their money. Unfortunately for our hapless expatriate workers who are treated disdainfully by our class-conscious society, Hundi system still proves to be a viable option.
Millions of Bangladeshi workers are working abroad side-by-side with other Asian expatriate workers from India, Pakistan, the Philippines to mention but a few. Many of these countries are fully aware of the crucial role their workers play in remitting much-need foreign currency and have dedicated labour-relations departments at their embassies abroad. These countries' foreign missions work hand-in-hand with host countries and take the issue of human rights and workers' rights with companies in those countries very seriously. Such a policy backup goes a long way in building trust between the governments and the expatriate workers.
Besides signing praises to their hard labour and paying tribute to sacrifices made by workers for the motherland, have the authorities gone the extra mile to help its expatriate workers? The BB is doing its job, but for things to change for the positive, policymakers need to build new bridges to reach the workers with a mission to win hearts and minds. When there is more trust, the messages of what needs to be done for the greater good can be channelled easily to the expatriate community. This and mobile financial services, when incorporated in channelling in foreign exchange earned abroad, will turn the tide against hundi.